The level of consumer credit debt held by households is an important indicator of their financial health. In the years preceding the 2008 crisis, savings fell and levels of consumer credit debt increased alarmingly. Interest payments on the outstanding stock of consumer credit debt, which has not significantly reduced in the past eight years, are now a significant burden on households. The repayment of debt requires households to cut back on spending in other areas of their budget and depresses overall consumer demand in the economy.
Britain’s debt problem also has a local dimension. Some neighbourhoods are more likely to be home to people with consumer credit debts than others. In particular, communities with high concentrations of lower income, younger and households living in (social or private) rented accommodation are more likely to have problems than those containing older owner-occupiers. The type of credit being provided in different communities is also important. In addition to these economic issues, over-indebtedness is associated with poor physical and mental health and there are also a range of negative impacts on children growing up in debtor households.
Given the importance of household debt, both economically and socially, it is surprising that we do not have more information available to us to enable its detailed mapping at the local level. Knowing where debt is concentrated would enable more strategic responses – for example, by informing the location of debt advice or by encouraging more effective engagement between mainstream lenders and the community finance sector in order to scale-up the provision of affordable credit.
This initial study is focused on the city of Leicester and focuses on unsecured lending patterns in Leicester. A second report will analyse mortgage lending within the city, and subsequent work will then be undertaken to extend the analysis across the sub-region.